Agenda and minutes

42.1     The minutes of the meeting held on 21 September 2020 were agreed as a correct record.

43.1     There were no apologies for absence.

Disclosures by all Members present of personal interests in matters on the agenda, the nature of any interest and whether the Members regard the interest as prejudicial under the terms of the Code of Conduct.

44.1     Cllr David Tutt declared a personal, non-prejudicial interest in item 20 as the Leader of  Eastbourne Borough Council, which is involved in an ongoing admission agreement with a sub-contractor.  Cllr Tutt did not take part in the discussion during that item.

Notification of items which the Chair considers to be urgent and proposes to take at the appropriate part of the agenda.

45.1     There were no urgent items.

46.1     The Committee considered the minutes of the Pension Board meeting held on 16 November 2020.

46.2     The Committee RESOLVED to note the minutes.

47.1     The Committee considered a report providing an update on the investment activities undertaken by the East Sussex Pension Fund (ESPF).

47.2     The Committee’s discussion included the following key issues:

• Passive equity funds are the source of around 75% of the Fund’s exposure to fossil fuels. The recent equity changes are expected to reduce holdings in fossil fuel companies from 4% to 2% of the value of the Fund.
• The ESPF retains 10% of its assets, or 25% of its holdings in equities, in several passive regional equity funds managed by UBS. These are standard market index tracking funds and so are not weighted against fossil fuel companies, unlike the majority of the ESPF’s equity funds. Discussions about what to do with these remaining assets will take place with the new investment adviser, ISIO, once they are appointed in February 2021.
• Any decision about divestment from index tracking funds needs to account for the loss of cash to the Fund from divestment in established fossil fuel companies that tend to pay dividends to shareholders.
• The Fund’s active managers – Newton and Ruffer – are members of the Institutional Investors’ Group on Climate Change (IIGCC), which pushes companies to align with the Paris Agreement. The IIGCC encourages its members to submit motions at shareholder meetings for action on climate change and has been very aggressive in this regard (investment managers are shareholders on behalf of the ESPF). Most Environmental, Social and Governance (ESG) consultants are in favour of this approach rather than blanket divestment from a sector.

47.3     The Committee RESOLVED  to:

1) note the Action Log and Investment Workplan (Appendix 1);

2) note the Quarterly Investment Report from the Investment Advisor, Hymans Robertson (Appendix 2);

3) agree the revised Investment Strategy Statement (Appendix 4); and

4) note the content of this report

5) Agree to ask the new investment advisors to review the remaining 10% of assets held in regional index equities.

48.1     The Committee considered a report presenting the Independent Auditor (Grant Thornton) report to those charged with governance, and reporting on anticipated unqualified audit opinion on the 2019/20 Pension Fund Annual Report.

48.2     It was clarified that there has been a delay in the Independent Auditor, Grant Thornton, issuing its audit opinion, but this is due to their own internal processes and not the ESPF.

48.3     The Committee RESOLVED to:

1. note the draft Independent Auditor’s (Grant Thornton - GT) report to those charged with governance on Pension Fund Annual Report 2019/20;

2. approve the draft Pension Fund Annual Report for publication.

49.1     The Committee considered a report providing an update on various governance and employer engagement work completed and changes affecting the Local Government Pension Scheme (LGPS) generally and ESPF specifically.

49.2     It was clarified that the new governance structure of the ESPF has been based on best practice published by the Scheme Advisory Board. It is hoped it will be effective, but any areas that are not currently addressed – for example, whether it is a conflict of interest for the Section 151 officer to be both the responsible officer for the administering authority of the Fund and a Chief Finance Officer of an employer of the Fund – could be revisited in the future.

49.3     The Committee RESOLVED to:

(1) Approve the ACCESS Pool Amended and Re-stated Inter- Authority Agreement (IAA) (Appendix 1);

(2) Note the update to the ACCESS link operator agreement;

(3) Approve the Pension Fund Conflict of Interests Policy (Appendix 2);

(4) Note the update on the McCloud Working Group;

(5) Approve Option 3 approach for classification and inclusion of employers for ill health insurance implementation as set out in 2.16 and Appendix 6;

(6) Note the draft Employer Forum agenda (Appendix 7);

(7) Note the progress in recruitment to the Pension Fund team and initiation of review of communications (Appendix 8); and

(8) thank Russell Wood for his work over the past 18 months whilst the new Pension Fund Team has been developed.

50.1     The Committee considered a report providing an update to the Pension Committee on matters relating to Pensions Administration activities.

50.2     It was clarified that this year 1,296 Annual Benefit Statements (ABS) were not produced compared to 15k last year and the figure is  now comparable to other administering authorities. The reduction in unproduced statements is largely as the result of a member tracing exercise that found addresses for a large number of gone away deferred members. There will be a repeat tracing exercise on a bi-annual basis from now on to help ensure the number stays low.

50.3     The Committee RESOLVED to:

1) Note the updates;

2) Note the progress of management in implementing the agreed actions arising from the internal audit report (Appendix 7);

3) Note the proposed Pension Administration Team (PAT) structure and estimated costs following transition from share service arrangements (Appendix 3).

51.1     The Committee considered a report on the outcome of the Internal Audit report: Governance, Strategy and Investments 2019/20 

51.2     The Committee RESOLVED to note the report.

52.1     The Committee considered a report on the 2020/21 business plan at Quarter 2 for the ESPF.

52.2     The Committee RESOLVED to:

1. note the revised forecast outturn position; and

2. note the update on deliverables from the Business Plan in Appendix 1

53.1     The Committee considered a report on the Annual Training Plan for the Pension Board and Pension Committee.

53.2     The Committee RESOLVED to:

1. Note the report from Hymans on the Knowledge Assessment results;

2. note the suggested training areas for the Annual training plan;

3. recommend that training is delivered in one-hour slots, three times per quarter; and

4) request that individual scores are provided to members who are interested in receiving them. 

54.1     The Committee considered the Risk Register for the ESPF

54.2     It was discussed that there appeared to be a number of risks that continued to appear red after mitigations had been put in place. The risk register is in the process of being reviewed to ensure that the strategy for risk mitigation is effective, the format of the risk register is appropriate, and the scores of different risks are correct.

54.3     The Committee RESOLVED to:

1) note the Risk Register; and

2) note that the Risk Register is being reviewed.

55.1     The Committee considered its work programme.

55.2     The Committee discussed the benefit of holding an additional meeting each year due to the large volume of items considered at each meeting.

55.3     The Committee RESOLVED to:

1) agree the work programme; and

2) request an additional meeting is held for the 2021/22 calendar year.

To consider excluding the public and press from the meeting for the remaining agenda item on the grounds that if the public and press were present there would be disclosure to them of exempt information as specified in paragraph 3 of Part 1 of the Local Government Act 1972 (as amended), namely information relating to the financial or business affairs of any particular person (including the authority holding that information).

56.1     The Committee RESOLVED  to exclude the public and press from the meeting for the remaining agenda item on the grounds that if the public and press were present there would be disclosure to them of exempt information as specified in paragraph 3 of Part 1 of the Local Government Act 1972 (as amended), namely information relating to the financial or business affairs of any particular person (including the authority holding that information).

57.1     The Committee considered a report providing an update on the activities of the Investment Working Group.

57.2     A summary of the discussion is set out in an exempt minute.

57.3     The Committee RESOLVED to note the report

58.1     The Committee considered a report on the procurement of Pension Administration Software.

58.2     A summary of the discussion is set out in an exempt minute.

58.3     The Committee RESOLVED to  agree actions which are set out in an exempt minute.

59.1     The Committee considered the ESPF breaches log.

59.2     The Committee RESOLVED to note the report.

60.1     The Committee considered a report on the latest admissions and cessations of employers within the ESPF.

60.2     The Committee RESOLVED to note the report.

61.1     The Committee considered a report on the Independent Advisor to the Pension Fund.

61.2     The Committee RESOLVED to agree the recommendations as set out in the report.